Brent Swallow, World Agroforestry Centre, Nairobi, Kenya

Approach, update on progress and future plans

12 April 2005

Bundling payments for environmental services: 

Using conjoint analysis to assess farmers’ preferences over different payment types and

conditionalities in Sumatra, Indonesia

Seminar outline:

• Motivation for a “bundle” approach to the design of environmental service mechanisms

• Briefly introduce the conjoint analysis method

• Describe study design for the Sumber Jaya case and invite comment on proposed next steps

Environmental Service Mechanisms

Public sector approach: promote general social

interest through stateregulations, subsides,

investments and taxes

… trend to decentralize

Community approach: Local regulations &

customary norms for local benefit will

also promotegeneral interest

Co-management

Public sector approach:

promote general social interest through state

regulations, subsides and taxes … trend to

decentralize

Community approach: Local

regulations & customary norms for

local benefit willalso promote general

social interest

Payment for environmental

service: Conditional payments

from specific demanders tospecific individualsor communities for

specific environmental

services

Public sector

approach: Community approach:

Payment for environmental

service:

Bundled approaches: contracts with credible local groups, with stable individual

membership; incentives including secure tenure, extension, public services, market assistance,

conditional on ES inputs or outputs

Example 1 of bundled approach:The case of the ProAmbiente Programme

In the Brazilian Amazon

PROAMBIENTE began in 2000 to improve social and environmental policy for the Amazon, as a proposal designed by social movements and NGOs (eg Federations of agricultural workers in the Amazon, Fishermen National Movement, Coordination of

Indigenous Nations in the Brazilian Amazon).

Adopted in 2003 by the federal government as a priority intervention for the Amazon

LAND USE PLANNING (PLOT AND LANDSCAPE)TECHNICAL ASSISTANCE / RURAL EXTENSIONSOCIAL ORGANIZATION REWARDING PRODUCERS FOR ENVIRONMENTAL

SERVICESCERTIFICATIONCREDIT (OPTIONAL)

Components of Pro-Ambiente

1. Acre: Alto Rio Acre2. Rondonia: Ouro Preto

d’Oeste3. Mato Grosso: Noroeste4. Tocantins: Bico do Papagaio5. Para: Rio Capim6. Roraima: Apiau 7. Para 2: Transamazon8. Amapa: Laranjal do Jari9. Amazonas: Manaus10. Para 3 (Fishermen): Marajo11. Marahao: Cocais12. Amazonas 2 (Indigenous):

São Gabriel da Cachoeira

PROAMBIENTE SITES (“poles”)

1

12

11

109

8

7

6

5

432

500 households in each pole, selected by local

organizations

Example 2 of bundled approach:The case of the HKm social forestry contracts

in (watershed) protection forests, Lampung, Indonesia

Questions for BASIS CRSP project: • What distribution of impacts?• How do people weigh off these explicit / implicit components? – using conjoint analysis

Property rights, environmental services and poverty – affiliated project of RUPES

Funded by USAID through BASIS CRSP

Partners:Michigan State University, ICRAF, IFPRILampung University

Strands in the bundle of Social Forestry Contracts

Explicit:Leasehold tenure securityVariable feesConditionality based on inputs thought to effectwatershed function (density & types of trees; localorganization to enforce rules; protection of forests)

Implicit:Forestry / agroforestry extensionFood security programmesRoads

Other possibilities:Conditionality of tenure based on watershed outputs (eg water quality; stream flow)Implicit components made conditional

Research Question: How do farmers’ evaluate tradeoffs among the various strands in the bundle of Environmental Service “Payments”?

Policy Question: Are there different ways that the social forestry contracts could be configured to be more efficient for society and attractive to farmers?

Analytical approach:

Question: What is similar about:

Cows in Burkina Faso

Round-trip airline tickets from BandarLampung to Jakarta

HKm agreements in Sumber Jaya??

An answer: They are all composed of several attributes that people value, but cannot easily express those values through normal market mechanisms.

Conjoint analysis: A method for quantifying the part-worth of different levels of the valuable attributes of a good or service.

• Assumes that a product may be defined using an aggregate of attributes that take certain levels. • Different levels of the attributes define different versions of the product under consideration.

• During the decision-making process, individuals appraise the worth of each combination, and their choice demonstrates prioritization among the different combinations of features.

• The total worth of a particular product is determined by the different partworths of each attribute level (Sayadi et al., 2004).

Key components of conjoint studies are:

• identification of key product attributes for study

• Identify relevant levels of those attributes

• construction of products with different “bundles” of attributes – tradeoffs between concern with the main effects of several attributes or interaction effects of a few attributes

• identify the population and important sub-populations or strata

• represent the attributes and bundles of attributes in ways that respondents can easily understand

• eliciting preferences using rating, ranking or comparison to status quo

• analysis

• interpretation

Back to HKm Social Forestry Contracts in protection forests in Sumber Jaya, Indonesia

Attribute Level 1 Level 2 Level 3

Explicit attribute of contract

1. Length of preliminary contract 3 years 5 years

2. Length of main contract 15 years 25 years 35 years

3. Required density of trees / ha 400 (5 meters) 600 (4meters) 1000 (3 meters)

4. Composition of trees allowed Less than 30% fruit trees allowed

Less than 50% fruit trees allowed

Less than 70% fruit trees allowed

5. Right to cut and sell timber trees that you plant on HKm land

Have right to sell Don’t have right to sell

6. Right to transfer your membership of the HKm group to someone else in exchange for money

Have right to transfer

Don’t have right to transfer

7. Level of fee to be paid for HKm 0 36,000 Rupiah per hectare per year

72,000 Rupiah per hectare per year

Implicit attribute of contract

8. Easier access to government credit programmes

Yes No

9. Easier access to agroforestry / forestry extension services and seedlings

Yes No

10. Better roads into the HKm area Yes No

11. Easier access to government programmes related to food security

Yes No

1.a. Composition of trees allowed -- Less

than 50% fruit trees allowed b. b. Level of fee to be paid for HKm –

0. c. Required density of trees / ha -- 400 (5

m spacing.) d. Length of preliminary contract -- 3

years e Length of main contract -- 15 years f. Easier access to agroforestry / forestry

extension services and seedlings g, Do not get easier access to government

programmes related to food security

Rating: ______ (1 is least preferred, …, 5 is most preferred)

Would you prefer this situation to your current HKm contract yes / no (circle answer)

2.a. Don’t get right to transfer your membership of the HKm group to someone else in exchange for money (b Length of preliminary contract -- 5 years c Composition of trees allowed Less than -- 30% fruit trees allowed d Length of main contract -- 35 years e Level of fee to be paid for HKm -- 36,000 Rupiah per hectare per year f Do not get easier access to agroforestry / forestry extension services and seedlings g Better roads into the HKm area

Rating: ______ (1 is least preferred, …, 5 is most preferred)Would you prefer this situation to your current HKm contract yes / no (circle answer)

Implications and observations from the pre-test

Principle / Observation from pre-test

Implication for study design

People need to get comfortable with the study objectives, attributes and traits before considering the bundles.

Plan for at least an hour of explanation and discussion in groups, before moving to individual interviews.

Group leaders have different experiences with HKm than members. Leaders want to vocalize their perceptions.

Begin with semi-structured interviews with group leaders and committee members.

Respondents can easily express their weightings on the importance of each attribute outside of the bundles.

Group and individual exercises in weighting / voting for different attribues.

People respond to the packet much more easily when displayed as a poster.

Display the HKm profiles on posters, with words and illustrations to represent the concepts.

People often want to rate the packets in numbers intermediate between the 5 levels (eg 2.6).

Record answers on a continuous scale from 0 to 5. This gives us more of a cardinal scale and thus more value in regression technique.

There were no women at any of the meetings.

Stratify the sample by gender.

The possibility of differentterms is new to many Respondents.

Explicitly incorporatenegotiation training intodesign (how?)

Proposal for revised set of attributes and levels (1/2):

Drop relatively unimportant attributes:• length of initial contract (already set for respondents)• government credit (not important in project area)• right to transfer (second generation issue)

Proposal for revised set of attributes and levels (2/2):

Offer different conditionalities:

Input-based attributes monitored for group & individual(tree density, composition, soil conservation?)

Input-based attributes monitored for group:(tree density or increasing tree biomass?)

Output-based attributes monitored for group:(maintain or improve water quality or reduce variation in stream flow)

Output-based attributes monitored for individual:(??)

Analysis of ticket experiment in Lampung University

Logistical regression:

Attribute Odds-ratio SigPrice 0.364 .000Lunch service 1.477 .040Queue time 1.249 .273On-time departures 1.150 .533Reputation for safety 2.675 .000